The battle between hedge fund titans William Ackman and Carl Icahn over Herbalife Ltd. (NYSE: HLF ) is becoming one of the most entertaining Wall Street clashes. Icahn has fired the latest shot: In a filing Thursday, he revealed he has a 13% long position in the nutritional supplement maker Herbalife. He said the thinks the company is undervalued and has great potential. That can't be good news for Icahn's longtime nemesis, Ackman, who is betting heavily on Herbalife's failing. Ackman announced a $1 billion short position in Herbalife on Dec. 19, then detailed on Dec. 20 in a more than three-hour presentation why he believed Herbalife is a multilevel marketing pyramid scheme. But Icahn couldn't disagree more, highlighted in this latest regulatory filing. Icahn said he plans to have discussions with Herbalife management about business and strategic alternatives to enhance shareholder value and mentioned going private. Shares of Herbalife spiked 20% before the opening bell Friday and ended the day up 1.2%. With Icahn's $214 million stake in Herbalife, the stage is set for an epic Wall Street showdown. To continue reading, please click here...

The battle between hedge fund titans William Ackman and Carl Icahn over Herbalife Ltd. (NYSE: HLF) is becoming one of the most entertaining Wall Street clashes.

Icahn has fired the latest shot: In a filing Thursday, he revealed he has a 13% long position in the nutritional supplement maker Herbalife. He said the thinks the company is undervalued and has great potential.

That can't be good news for Icahn's longtime nemesis, Ackman, who is betting heavily on Herbalife's failing.

Ackman announced a $1 billion short position in Herbalife on Dec. 19, then detailed on Dec. 20 in a more than three-hour presentation why he believed Herbalife is a multilevel marketing pyramid scheme.

But Icahn couldn't disagree more, highlighted in this latest regulatory filing. Icahn said he plans to have discussions with Herbalife management about business and strategic alternatives to enhance shareholder value and mentioned going private.

Shares of Herbalife spiked 20% before the opening bell Friday and ended the day up 1.2%.

With Icahn's $214 million stake in Herbalife, the stage is set for an epic Wall Street showdown.

Icahn vs. Ackman: It's Not Just Business, It's Personal

Icahn, CEO of Icahn Partners, and Ackman, founder of Pershing Square Capital Management LP, have a bitter history that started more than a decade ago when the two ended up in court over a real estate company. Icahn was forced to pay $4.5 billion to Ackman and his company at the time, Gotham Partners, and Icahn has never let it go.

"What I can tell you is, this is not an honest guy, and this is not a guy who keeps his word. This is a guy who takes advantage of little people," Ackman said of Icahn.

"He's the quintessential example of "if you want a friend on Wall Street, get a dog,'" Icahn responded. "I appreciate you calling me a great investor, but unfortunately I cannot say the same."

After the interview, Herbalife dropped from $45 to $35 in one week. And the volatility the stock has seen is likely to continue.

Icahn and the "Mother of All Squeezes'

The main problem Icahn says he has with Ackman over Herbalife is the aggressive nature in which he shorted the company. Not only did Ackman take a significant 20% short position, but according to Icahn, he did it in such an extravagant nature and said that Ackman's short interest was just a "scheme."

Ackman said he started shorting Herbalife last May when the stock was trading around $45. It is not known exactly the average price of his shares, but from the filings it seems he made most of the purchases between $45 and $55.

When he announced his short position in late December, the stock was at $42.50 and quickly sold off, bottoming under $25 by Christmas Eve.

Yet a short squeeze, where a quick increase in a stock's price forces short sellers to make margin calls and buy the stock to exit the short and cut their losses, sent the stock up to $46 by Jan. 15. This push was helped by Dan Loeb, founder of Third Point LLC, revealing an 8% long stake in Herbalife.

Now that Icahn has revealed his long position, which mostly consists of call options that he purchased when the stock was trading around $35, the pressure on Ackman and his short position is even higher.

In fact, Icahn said Ackman could be in for the "mother of all short squeezes."

But so far Ackman has not backed off from his short and remains confident in his position.

"We invest based on a careful analysis of the facts. After 18 months of due diligence, we have concluded that it is a certainty that Herbalife is a pyramid scheme," Ackman said Friday in a statement. "Our conclusions are unaffected by who is on the other side of the investment. Our goal was to shine a spotlight on Herbalife. To the extent Mr. Icahn is helping achieve this objective, we welcome his involvement."

With Herbalife trading around $40 investors will have to stay tuned to see who comes out on top in the battle between the two titans.